A grave mistake that many startups and young entrepreneurs make repeatedly is to get into business deals with other people without a contract. Some business owners simply think they can trust the people they are about to do business with. Others think they are enjoying a favour from that person, probably because he or she is putting some money into the business. Whatever reason you have to not put your agreements on paper is never good enough.
A business can be dead on arrival just because it starts without a proper agreement. Even if a business were to be started by couples, there should be agreements in writing as to who does what and who gets what from the business. Any business that does not come with agreements is already opened up to unnecessary risk.
While some parties in the business may get into the business with sincere intentions, there are those who will leverage the sincere intentions of others to cash in on all that the business has and leave it with a mere skeleton. They will milk the business dry before the other beneficiaries understand what is happening.
Businesses must be kept professional and nothing should get in the way of doing things professionally. When the business involves the capital of other people, the business owner cannot afford to take undue risk by releasing it to other people without a written contract. Please note that in business, a verbal contract is not enough because that cannot prove anything in a court of law. It is only written contracts that entrepreneurs can fall back on to defend themselves.
A contract is not just a document stating what the parties in it agreed to do. It is a legal document and is binding on everyone involved in the business. That is why there should be a proper contract as a form of insurance against protecting the business from avoidable risks and losses.
There some things that should be found in any valid contracts drawn up by the parties to a business deal or their legal counsel. While there is no particular order or format, all contracts should contain these major things listed below:
The financial and other resource commitments of each party involved
The physical responsibilities of everyone on board.
What are the benefits or rewards accruing to each person for their roles?
When are the benefits due to be paid?
Create timelines for deliverables and the specific things to expect at the given timelines
Specify the consequences for default by each party if deliverables are not seen at given timelines.
Specify communication mode and reconciliatory methods if agreements are being breached before resorting to litigation.
There should be witnesses to the agreements and they should understand the agreement.
Names of businesses should be clearly stated and the registration details of the business specified. This lets a business know when they are dealing with a legal entity that can be sued or just an individual.
The legal jurisdiction within which litigation can take place should be specified.
It is a horrendous experience when sincere entrepreneurs have been dealt a big blow by fraudsters simply because of papers that where not tidied. Beyond just putting agreements on black and white, it is also very important for entrepreneurs to understand what they are signing. Legal terms are not interpreted with ordinary English language. It is not always what it seems. Getting a lawyer to interpret an agreement is always cheaper than getting one to defend in the court of law.
Finally, agreements or contracts are not usually in the volumes. There are business contracts in one page and they will contain everything they need to contain for both parties to be held responsible for their actions or inactions. No matter how simple the contract seems, so long as it is properly written and signed, it remains valid and will always save a business from some troubles. Please go through the stress of having a lawyer prepare one or have a lawyer review the one you have prepared. You should also let them advise on any agreement you are about to sign. When this is not taken care of, an entrepreneur may be signing off his or her entire business.